Monthly Archives: December 2016

Ask Yourself Before You Invest

As a financial planner and fiduciary investment advisor, I work with people with varying goals and vastly different levels of education, income, assets and comfort with technology. I’m often worried by similarities I see among investors of all stripes.

Many people simply have no plan when they start investing. Others follow the latest hot investment tips from a stranger online, on TV or in a magazine. I’m surprised by how many investors think they’ve done well, but don’t know how to measure their true rate of return for the risk they have taken. Few investors even know how much risk is in their portfolios.
These issues arise because investors generally don’t use a consistent methodology — a repeatable, rule-based process — to build or monitor their portfolios. That often leads to portfolios that aren’t well-diversified, don’t have the appropriate amount of risk for the investor and aren’t tax-efficient. What’s more, many investors don’t review their portfolios and haven’t thought much about how their investments fit into a bigger overall plan.

 

Are you ready to invest?
What can you do to make sure you aren’t in this camp? First, determine whether you’re really ready to invest on your own. Based on my experience, there are a number of essential tasks to complete and issues to understand before you start investing.
Completing the following investing assessment can help you determine how prepared you are and whether you’d be better served by obtaining professional assistance from an objective, fee-only advisor.
1. I have a written list of my short-, intermediate- and long-term financial goals and know how much I need to save and the required rate of return to fund each of those goals.

Yes
No
2. I have completed a trusted risk assessment questionnaire tool (such as this one from FinaMetrica) and understand how my risk tolerance fits in with the required rate of return to fund my goals.

Yes
No
3. I have a written investment plan (investment policy statement) that spells out the asset allocation to be used in my portfolio along with the expected range of returns.

Do You Thing That Renting Is Better than Buying

Have you ever felt pressured to buy a house? Maybe from your friends, your family, your co-workers, or even yourself? Like you haven’t actually made it as an adult until you own your home?

 

It’s a common feeling, but the truth is that buying a house ISN’T always the right decision. In some cases renting is a smarter move, both for your wallet and your lifestyle. Here are four reasons why.

 

1. Flexibility

 

Life changes fast. That great new job you just started might turn into an exciting opportunity in a different city. That big family you planned on having might turn into a smaller one.

 

Renting gives you the ability to quickly change your living situation to best match the new realities of your life. That flexibility can be the difference between seizing an opportunity and having to pass on it.

 

2. Cost

 

Proponents of buying like to say that when you’re renting, you’re essentially paying off someone else’s mortgage. So why not buy and make sure that money is going towards yourself?

 

There is some truth to that, if you stay in one place for an extended period of time (typically 5-7 years or longer), then buying often results in the lower long-term cost.

 

In the meantime buying can be really expensive. There’s the upfront cost of the down payment. There’s the cost of handling the fixes and improvements that come with any new purchase. There’s the cost of new furniture. There are the ongoing costs of insurance, taxes, and maintenance.

 

Renting has costs too, but they’re often much smaller and more predictable, at least in those first few years. And in many markets where housing prices are high, renting can actually be a better long-term financial decision.

 

You can use this calculator from The New York Times to figure out just how long you would have to live in one place before buying became cheaper than renting.

 

3. Adjustment

 

Renting is often a great idea any time you move to a new place.

 

It gives you the opportunity to figure out which neighborhoods you like and which you don’t so that you can eventually make a buying decision you’ll be happy with for the long-term. There’s no sense in being stuck somewhere you don’t like simply because you felt rushed into buying a house.